Sunday, 19 August 2018

When contract of personal service is enforceable?

The exceptions carved out in the judgments of the Hon'ble Supreme Court, particularly, in the aforesaid judgment in the case of K.K. Saksena [MANU/SC/1213/2014 : 2015 ALL SCR 1401] (supra) shows that when an authority or body, like appellant No. 1 in the present case which is an instrumentality of the State under Article 12 of the Constitution of India, is involved, the exception would operate and appellant No. 1 would not be permitted to wriggle out of its obligations under the agreement dated 22-07-1990 executed by appellant No. 1 with the respondents. This is because the promise to provide employment to respondent No. 1 upon his attaining majority, in lieu of acquisition of land belonging to him, was given by appellant No. 1 on the basis of its policy, which was the reflection of State Policy under which relief was required to be granted to persons like respondent No. 1.

14. Once it is held that the said promise of employment was given by appellant No. 1 as a body attracting the character of State, the exception as recognized by the Hon'ble Supreme Court in the aforesaid judgment would come into play and it could not be said that the agreement dated 22-07-1990 in the present case was not enforceable, being a contract of personal service. The promised employment in the present case ceased to have private law character and its status changed due to the fact that appellant No. 1 had made promise of grant of such employment in terms of its policy while acquiring the land belonging to respondent No. 1.


IN THE HIGH COURT OF BOMBAY (NAGPUR BENCH)

Second Appeal No. 2 of 2017

Decided On: 03.04.2018

Western Coalfields Limited  Vs. Jaideo Murlidhar Vidhate and Ors.

Hon'ble Judges/Coram:
Manish Pitale, J.

Citation: 2018(4) MHLJ 697


1. By this appeal, the appellant No. 1-Western Coalfields Limited has challenged the judgment and order dated 13-07-2016 passed by the Court of District Judge-1, Kelapur in Regular Civil Appeal No. 66 of 2012, whereby the said Court has allowed the appeal of the respondents and decreed the suit filed by them. The facts giving rise to the present appeal are that; respondent No. 1, at the relevant time being a minor, owned agricultural land in Gat No. 116, admeasuring 0.82 HR at Village Belora, Taluka Wani, District Yavatmal and the said agricultural land was maintained by respondent No. 2, being the natural guardian of respondent No. 1. In the year 1988, the appellants required land for the purposes of 'Open Cast Mine' and it acquired the aforesaid land belonging to respondent No. 1. It was the policy of the appellants to provide employment to the land owner or his nominee in addition to payment of amount towards compensation for acquisition of land. Accordingly, Sub Area Manager of the appellants entered into an agreement with respondent No. 2 on 22-07-1990 to provide employment to respondent No. 1 upon his attaining the age of majority. The respondent No. 1 being born on 18-01-1980 was about 10 years old when the said agreement was executed.

2. Upon attaining the age of majority, the respondents approached the appellants to honour the said agreement and to provide employment to respondent No. 1. As the appellants failed to abide by their obligation under the said agreement, on 09-01-2004, the respondents were constrained to issue legal notice to the appellants and when by its reply dated 18-03-2004, the appellants refused to provide employment to respondent No. 1, the respondents on 25-08-2005 were constrained to file Regular Civil Suit No. 67 of 2005, seeking specific performance of the said agreement from the appellants.

3. The respondents placed on record the aforesaid agreement and other supporting documents before the trial Court. On the issues framed by the trial Court, findings were rendered in favour of the respondents as regards the validity of said agreement dated 22-07-1990 and on the issue of limitation, but, the trial Court held that the respondents were not entitled to relief of specific performance. It was held by the trial Court that since the agreement was not executed under the Land Acquisition Act, 1894 or any Rule, it was not enforceable.

4. Aggrieved by the same, the respondents filed appeal before the Court below. In the impugned judgment and order, the Court below answered points framed by it in favour of the respondents. On the basis of oral and documentary evidence on record, it was held by the Court that the appeal deserved to be allowed because specific terms were provided in the agreement and there was no reason why the agreement could not be enforced, particularly when it was based on the policy of the appellants and when employment had been provided to other similarly situated persons. It was found that the agreement was valid and that it deserved to be specifically enforced. By the impugned judgment and order, the appellants have been directed to provide suitable employment to respondent No. 1, subject to his educational qualifications and physical as well as mental fitness.

5. Aggrieved by the same, the appellants have filed this Second Appeal. On 12-06-2017, this Court issued notice for final disposal on the following substantial question of law.

"Whether the agreement dated 22-7-1990 could be specifically enforced especially when it was a contract of personal service in the light of provisions of Section 14 of the Specific Relief Act, 1963?"
6. While granting interim relief in favour of the appellants by the said order, this Court recorded that the appellants had relied upon the judgment of the Hon'ble Supreme Court in the case of Executive Committee of U.P. State Warehousing Corpn., Lucknow v. Chandra Kiran Tyagi, reported at MANU/SC/0499/1969 : 1970 SC 1244. It is evident that the aforesaid question on which this Court has issued notice was neither argued nor considered in the proceedings before the two Courts below. Therefore, on the basis of material on record, it has to be examined whether the present agreement can be said to be not specifically enforceable, being a contract of personal service, in the light of Section 14 of the Specific Relief Act, 1963 [for short, 'the aforesaid Act']

7. A perusal of the said provision would show that if the agreement in the present case is held to be a contract of personal service, the appellants would succeed and the relief granted to the respondents will have to be set aside.

8. Shri C.S. Samudra, learned Counsel appearing on behalf of the appellants has relied upon the aforesaid judgment of the Hon'ble Supreme Court and he has further relied upon the judgment of the Hon'ble Supreme Court in the case of Nandganj Sihori Sugar Co. Ltd., Rae Bareli and another v. Badri Nath Dixit and others, reported at MANU/SC/0350/1991 : (1991) 3 SCC 54. The thrust of the submissions made by the learned Counsel appearing on behalf of the appellants is that in view of Section 14 of the aforesaid Act and the law as laid down by the Hon'ble Supreme Court, the rule is that an agreement in the nature of the said agreement dated 22-07-1990 in the present case is not enforceable, being a contract of personal service. No other contention regarding validity of the agreement or otherwise has been raised on behalf of the appellants.

9. On the other hand, Shri H.D. Dangre, learned Counsel appearing on behalf of the respondents has submitted that the aforesaid judgments of the Hon'ble Supreme Court and the other judgments on which he has placed reliance, show that the prohibition under Section 14 of the aforesaid Act on non enforceability of contract of personal service, is not absolute and that exceptions have been carved out in the judgments of the Hon'ble Supreme Court. It is submitted by the learned Counsel that these judgments have considered the cases where dismissal from service has been challenged and three categories of cases have been identified as exception to the rule of non enforceability of contract of personal service. The learned Counsel has emphasized on the fact that appellant No. 1 in the present case is an authority/body, which is a State within a meaning of Article 12 of the Constitution of India and that therefore the present case falls within one of the aforesaid exceptions carved out in the judgments of the Hon'ble Supreme Court. On this basis, he submits that the aforesaid substantial question of law deserves to be answered in favour of the respondents and that this appeal deserves to be dismissed. The learned Counsel appearing on behalf of the respondents has placed reliance on the judgments of the Hon'ble Supreme Court in the case of General Manager, Western Coalfields Ltd., Pench Area, Parasia, M.P. and another v. Barkan alias Kanhaiya, reported at MANU/SC/8227/2007 : (2007) 14 SCC 47, Managing Director, Uttar Pradesh Warehousing Corporation and another v. Vijay Narayan Vajpayee, reported at MANU/SC/0432/1980 : (1980) 3 SCC 459 and K.K. Saksena v. International Commission on Irrigation and Drainage and others, reported at MANU/SC/1213/2014 : (2015) 4 SCC 670: [2015 ALL SCR 1401].

10. Upon hearing the learned Counsel appearing on behalf of the parties and upon perusal of the material on record, it is necessary to examine whether in the present case the decree passed by the Court below in favour of the respondents is sustainable and whether the agreement dated 22-07-1990 could be specifically enforced against the appellants.

11. A perusal of the judgments placed on record by both the parties show that the non enforceability of contract of personal service under Section 14 of the aforesaid Act cannot be said to be an absolute rule and that exceptions have been carved out in judgments of the Hon'ble Supreme Court. Even in the judgment in the case of Executive Committee of U.P. State Warehousing Corpn., Lucknow (supra) on which the appellants have placed reliance, the said exceptions have been acknowledged. In the judgment in the case of K.K. Saksena (MANU/SC/1213/2014 : 2015 ALL SCR 1401) (supra), the Hon'ble Supreme Court has held as follows :

"52. It is trite that contract of personal service cannot be enforced. There are three exceptions to this rule, namely:

(i) when the employee is a public servant working under the Union of India or State;

(ii) when such an employee is employed by an authority/body which is a State within the meaning of Article 12 of the Constitution of India; and

(ii) when such an employee is "workmen" within the meaning of Section 2(s) of the Industrial Disputes Act, 1947 and raises a dispute regarding his termination by invoking the machinery under the said Act.

In the first two cases, the employment ceases to have private law character and "status" to such an employment is attached. In the third category of cases, it is the Industrial Disputes Act which confers jurisdiction on the Labour Court/Industrial Tribunal to grant restatement in case termination is found to be illegal."

12. The said judgments of the Hon'ble Supreme Court have recognized the aforesaid exceptions in the context of dismissal of an employee and in that context the question regarding non enforceability of contract of personal service has been examined. It has been held that if the case falls within the aforesaid exceptions, the employment would cease to have private law character and its status would change so as to take it out of the purview of Section 14 of the aforesaid Act. In the present case, the question of right to seek employment of respondent No. 1 arises for consideration in terms of agreement dated 22-07-1990 and in that context the aforesaid question is required to be examined.

13. The exceptions carved out in the judgments of the Hon'ble Supreme Court, particularly, in the aforesaid judgment in the case of K.K. Saksena [MANU/SC/1213/2014 : 2015 ALL SCR 1401] (supra) shows that when an authority or body, like appellant No. 1 in the present case which is an instrumentality of the State under Article 12 of the Constitution of India, is involved, the exception would operate and appellant No. 1 would not be permitted to wriggle out of its obligations under the agreement dated 22-07-1990 executed by appellant No. 1 with the respondents. This is because the promise to provide employment to respondent No. 1 upon his attaining majority, in lieu of acquisition of land belonging to him, was given by appellant No. 1 on the basis of its policy, which was the reflection of State Policy under which relief was required to be granted to persons like respondent No. 1.

14. Once it is held that the said promise of employment was given by appellant No. 1 as a body attracting the character of State, the exception as recognized by the Hon'ble Supreme Court in the aforesaid judgment would come into play and it could not be said that the agreement dated 22-07-1990 in the present case was not enforceable, being a contract of personal service. The promised employment in the present case ceased to have private law character and its status changed due to the fact that appellant No. 1 had made promise of grant of such employment in terms of its policy while acquiring the land belonging to respondent No. 1.

15. On the factual aspects and findings rendered by the Court below in the impugned judgment and order, there is no dispute raised on behalf of the appellants. Hence, the agreement is found to be valid, the suit is found to be filed within limitation and as it is found that the aforesaid agreement dated 22-07-1990 would fall within the recognized exceptions to the prohibition contemplated under Section 14 of the aforesaid Act, the substantial question of law framed by this Court while issuing notice, deserves to be answered in favour of the respondents and against the appellants. In the light of the above, the instant appeal is dismissed and the impugned judgment and order stands confirmed. There shall be no order as to costs.




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